Hedge Funds on Prime Brokerage Services and Technology: A Finadium Survey

Finadium
June 2013

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Prime brokers must allocate technology and service resources to balance capturing client loyalty with supporting hedge fund independence. This is the conclusion of a new survey conducted by Finadium and SunGard of hedge funds on prime brokerage technology and service levels.

Prime brokers remain critical business partners for hedge funds in North America and Europe, but the nature of the relationship is changing. Hedge funds continue to rely on prime brokers to clear and report trades but also want to establish themselves as independent firms that can function successfully with multiple prime brokers, but without needing any one bank to succeed. This extends through to databases for trade reporting, data collection on stock loan rates and the ability to show investors that the hedge fund is a robust entity with its own infrastructure. While some of these lessons were learned after Lehman’s failure, the change in attitude now includes thinking about technology, service levels and what hedge funds want most from their prime broker partners.

This report presents how a sample of hedge funds views the technology and service levels provided by their prime brokers, and their thinking on the right mix of internal technology versus technology provided by a prime broker. Hedge funds are a diverse group and putting one stamp across every fund is a difficult task. However, our survey shows some general trends that prime brokers may want to consider in servicing their clients in the current financial market environment.

This report should be read by prime brokers, by hedge funds working to optimize their prime brokerage relationships and by third party service providers to both prime brokers and hedge funds.

This report is 22 pages with 20 exhibits.

This report is available at no charge courtesy of SunGard.

TABLE OF CONTENTS
■ Executive Summary

■ Decoding the “Hedge Fund” Market
– Methodology

■ Physical and Synthetic Prime Brokerage

■ Where Prime Brokers Offer the Most Value
– Main Communication Challenges

■ Technology and Risk Management

■ Lessons and Opportunities

■ About the Author

■ About Finadium

■ About SunGard

■ About SunGard’s Apex Prime Brokerage